A vital piece of advice given to every investor is to ensure that their portfolios include a diverse range of investments. The idea behind this is to balance out risks and maximise gains. Low-risk investments tend to bring lower returns but offer protection against loss from market volatility.
On the other hand, high-risk schemes have a higher potential for returns with a greater exposure to risk. As such, the selling point for low-risk investments is the assured returns and stability they promise.
A fixed deposit, or FD, is one of the most popular low-risk instruments in India. Meanwhile, real estate investments are high-risk, carrying emotional value and personal interest for investors.
Both are seen as lucrative for different reasons. Therefore, as an investor deliberating on FD vs real estate, it may be tough to decide which one is a better bet for your goals. Read on to know more about the features and differences you should note when comparing real estate vs FDs.
To analyse which option is ideal for your needs, consider these parameters to understand investments in real estate vs fixed deposit:
Parameters |
Fixed Deposit |
Real Estate |
Returns |
Interest earned is fixed at a predetermined rate, ensuring the stability of returns.
However, these returns may not be high. |
Returns depend on market movements and have the potential to be high. But they can also be low due to a drastic drop in value. |
Risk |
Low-risk, making it suitable for risk-averse investors. |
High-risk, suitable for investors who have a higher risk tolerance. |
Affordability |
Minimum deposit amount starts as low as ₹1,000. |
This is subjective to the property type and the region it is located in. Depending on the locale, you may need several lakhs of rupees to invest. |
Additional Expenses |
This is a one-time deposit. There are no additional expenses, excluding penalty charges. |
Real-estate investments have additional expenses* that reduce your final returns and can consistently put pressure on your finances. |
Transparency |
The process of opening an FD and receiving the matured amount is transparent. Only trustworthy financial institutions offer FDs.
You can access their public records and ratings from different sources, such as ICRA or CRISIL. This gives you a comprehensive idea of the issuer’s credibility and liabilities. |
In comparison to FDs, real estate is not as transparent. Too many variables and stakeholders are involved, and the regulations or laws may not always shift in your favour.
Investors are relatively more vulnerable to scams or fraud in the case of real estate. |
Add-on expenses include infrastructure, maintenance, security, registration, ownership title, stamp duty, etc. Due to these additional expenses, some cases of property investments have shown a guaranteed rate of returns of only 2.5% p.a.
Real estate investments attract investors for a number of reasons. This includes the prospect of great returns, the opportunity to get recurring income, and the ownership of the property.
However, the influence of market changes makes it a high-risk avenue with no stability or guarantee of returns. Moreover, many invest in real estate after availing loans, whose repayment, along with additional expenses, can eventually become a significant burden.
On the other hand, although the returns with FDs may be lower in comparison, fixed deposits offer security and stability. If your priorities are assured returns from an affordable investment, FDs are the answer to the real estate vs FD debate.
Banks, NBFCs, and other financial institutions throughout India offer FDs. In fact, you can invest in reputed schemes from leading issuers, like the Bajaj Finance FD, on Bajaj Markets.
In the fixed deposit vs. real estate investment debate, choosing one or the other can be tricky. Ultimately, the key is to assess your goals, risk tolerance, and financial condition as an investor to find the best option.
Fixed Deposit and Other Investment Comparisons |
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For those interested in real estate, rental properties are an option. Flipping houses can also bring gains, or you can buy real estate using leverage and pay the partial cost up front and the rest with EMIs. A more hands-off method is real estate investment groups, and Real Estate Investment Trusts (REITs) are another option.
Add-on expenses include infrastructure, maintenance, security, registration, ownership title, stamp duty, and more.
You can browse a variety of investment options on Bajaj Markets - a one-stop platform for all your financial needs.
FDs are generally considered safer with predictable returns, while real estate can offer potential appreciation and rental income but involves higher risks and management responsibilities. The choice between real estate vs FD depends on individual financial goals, risk tolerance, and investment horizon.